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Coronavirus: Double-dip downturn fears as fresh lockdown looms

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Britain is facing a double-dip downturn and an even bigger public debt pile as a new national lockdown looms, economists have warned.

Experts at Deutsche Bank think GDP could shrink by as much as 10% in November, while other forecasters expect the fourth quarter as a whole will see a contraction ranging from 1.5% to more than 4%.

With the Treasury’s furlough scheme extended, the cost of the crisis to the public purse is also growing – and Citi analysts predict borrowing of more than £400bn for the current financial year.

That would add to the UK’s debt pile, which has risen to more than £2trn during the crisis, taking it to more than 100% of GDP for the first time since the 1960s.

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Britain suffered its deepest recession on record earlier this year as the first lockdown crushed economic activity.

GDP shrank by 2.5% in the first quarter and 19.8% in the second quarter.

Third quarter figures due next week are expected to show a return to growth, but any lingering hopes of a “V-shaped” bounce-back have diminished as case numbers surge again.

The National Institute for Economic and Social Research (NIESR) said on Monday that the announcement of a new lockdown had pushed its fourth quarter forecast negative, to -3.3%.

It also now sees GDP for 2020 as a whole falling by 11-12%, whereas before it had pencilled in a contraction of 10.5%.

The NIESR said the extension of the furlough scheme to cover the new lockdown period, due to end on 2 December, meant unemployment was likely to be lower than its previous forecast of more than 7% by the end of the year – though added that it may simply have postponed the increase in joblessness.

Later this week, the Bank of England will publish updated economic forecasts in its latest monetary policy report – and there is speculation it could also unleash up to £100bn in further stimulus measures.

In August, the Bank forecast that GDP would shrink by 9.5% this year.

However by September it was already warning that a rise in COVID-19 cases could take a further toll on activity.

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